Albany Abandons Budget and Agrees on Stopgap Spending

By CLIFFORD J. LEVY

Published: March 29, 1996

ALBANY, March 28—
Gov. George E. Pataki and legislative leaders today abandoned their effort to pass a state budget on time because of the budget impasse in Washington. They agreed instead to a stopgap spending measure that would freeze state spending at current levels for four weeks while also allowing a previously approved tax cut to take effect on Monday.

The move insures that the budget will be late for a 12th consecutive year, an ignoble tradition in Albany that has undermined confidence in New York's fiscal policies and driven its bond rating to among the lowest of any state. The state's fiscal year begins on Monday.

The measure endorsed today would pay the state's bills under the old spending levels until April 30. But that could worsen the state's finances because the second stage of a cut in state income taxes that the Legislature passed last year at Mr. Pataki's urging is to begin on Monday, costing the state $1.7 billion in the next fiscal year.

In the budget he introduced last December, the Governor had called for deep reductions in state spending on Medicaid, welfare and other programs to help pay for the tax cut. But those plans are now on hold.

At a meeting today, Mr. Pataki told Republican and Democratic leaders of the Legislature that they should quickly come to terms on a new spending plan. He said four weeks should be enough time to wrap up the process.

"The goal is to have us have an orderly month, to continue to observe what is happening in Washington, to not raise anybody's anxiety or fears about state government," Mr. Pataki said.

Mr. Pataki has said repeatedly that despite the state's fiscal problems, he would not consider repealing the tax cut. Both Joseph L. Bruno, majority leader of the Republican-controlled State Senate, and Speaker Sheldon Silver, a Democrat who heads the Assembly, have concurred.

The state budget is in disarray mostly because Mr. Pataki based his original plan on changes that he expected the Federal Government would make in its rules for Medicaid and welfare spending. But President Clinton and Congress remain at odds over how to revamp those programs, and without the expected changes an additional $2 billion gap opens.

Nearly two weeks ago, Mr. Pataki presented modifications to his spending plan, contending that he had found new revenues that would patch most of that $2 billion hole, even if the Federal Government took no action.

But many legislators and fiscal monitors expressed skepticism about whether the Governor had really come up with that money, and today's announcement suggested that Mr. Pataki and the Legislature want more time to figure out how to piece together the state budget if a Federal budget is not passed soon.

In recent weeks, Mr. Pataki had publicly clung to the hope that he and the Legislature could agree on a budget by Monday. As it became clearer in recent days that it would not happen, he began lobbying for a stopgap measure that would last only two weeks.

But legislative leaders sought six or eight weeks, and today the two sides compromised on four weeks.

The stopgap measure this year is longer than those that the Legislature routinely passed in previous years when it missed the budget deadline. Last year, before the budget was finally passed in June, the Legislature approved a series of one-week appropriations to keep the state running.

The move today drew criticism from fiscal monitors, who said New York's leaders had rarely shown fiscal discipline. They said they were concerned that because the tax cut would take effect on Monday without any corresponding cuts to pay for it, the budget would be thrown further out of balance.

"This makes an already grim situation grimmer," said Raymond D. Horton, president of the Citizens Budget Commission, a group that studies government finances. "You are phasing in a tax cut without doing anything on the expenditure side. It's a duck. It's the easy way out."

Robert Kurtter, a vice president at Moody's Investors Service, which rates government bonds, noted that many other states that were also grappling with the fallout from the Federal stalemate had not delayed their budgets.

Mr. Kurtter, whose firm has given New York the second-lowest rating of any state, after Louisiana, also questioned why Mr. Pataki and the Legislature wanted a postponement when it did not appear that action in Washington was imminent.

"Delaying the budget process to wait for something that doesn't seem to be close to being worked out seems to be waiting for nothing," he said. "It makes one wonder why New York has to go through a ritual that every other state doesn't have to do."